Modern supply chains today incorporate several intricate and unplanned twists and turns, more than ever before. These when leveraged accurately result in great returns, however when not optimized, could lead to risks and revenue loss at each stage. Supply chain costs are therefore at an all time risk due to this.
Today, most supply chain managers are under the constant pressure to reduce costs, improve supply chain efficiencies, and enhance revenue margins. With a lack of clear visibility into their supply chains due to manual, reactive operational approaches and poor demand planning strategies & out-dated planning tools, they miss out on the much needed real-time granular insights. This keeps them from creating agile, synchronized and responsive supply chain plans to achieve the desired operational excellence.
According to Gartner, most supply chain cost management models remain short term, siloed and functionally focused across the supply value chain. While short-term cost goals are prioritized over creating long-term business value, a myopic, function-specific focus impacts the ability to pursue bigger change and achieve the full performance potential.
Instead of simply focusing on reduction strategies, they focus on aligning and collaborating around key operating outcomes to optimize supply chain costs.
3 Powerful Strategies For Assured Supply Chain Cost Reduction
- Supply Chain metrics and KPI alignment with overall organizational business goals- Since meeting business outcomes with holistic organizational alignment is a complex area due to each business function’s KPI complexity, it is critical to align business value including customer experiences, profitability, compliance and resource utilization with efficient supply chain planning. This can eventually impact the final organizational outcomes. It is therefore important to optimize the overall cost through organization wide collaboration and innovation by using appropriate high level, mid level and granular level cost drivers where needed. This way overall investments can be justified based on their true potential to enhance overall organizational efficiencies.
- Improved holistic supply chain visibility for seamless inventory movement – As businesses grow, end-to-end supply chain visibility becomes instrumental in reducing supply chain costs. In order to streamline the supply chain, supply chain leaders need to be aware of their inventory status by producing the right amount of inventory in the right quantity and at the right time. It is key to identify what to produce faster to reduce redundant inventory mix for overall optimized inventory. Using a smart AI-driven demand sensing solution here, can equip them with the tools to tackle market demand and supply fluctuations including seasonal peaks, erratic variations in shipping demands and transportation issues. This can also help make the right decisions to understand what to move, how to expedite this movement and what has to be eventually eliminated from the inventory mix.
- Demand-driven supply chain planning based on real-time insights- By using the right demand sensing tools as the base for supply chain planning, supply chain planners can deploy real-time insights for demand prediction. This way, supply chain planners and managers can accordingly tweak their pricing strategies as well, to drive revenue growth, expand margins, add new product lines and deal with limited supply scenarios. Also, with accurate demand sensing and forecasting tools as the base for supply chain planning, this can guarantee a holistic view of all the channels.This also ensures effective management of risks including natural calamities, market fluctuations, supplier unpredictability, etc.
Start with a robust supply chain plan
A supply chain plan can directly help decrease supply chain costs including inventory costs, unplanned breakdown/damage costs, shipment costs, operational running costs, etc. Similarly, planners also see improvements in system responsiveness, customer/ vendor relationships, logistical issues, etc.
If you wish to learn more about how ThroughPut can optimize your supply chain costs, contact us for a demo.
Supply chain cost savings are a result of improving yield, energy, and throughput